Terry is accused of a racially aggravated public order offence during a Premier League match on October 23 last year, which was broadcast to millions of people.

Appearing at Westminster Magistrates' Court, Terry sat in the dock wearing a light grey suit, white shirt and pink tie. Opening the prosecution, Duncan Penny said: "The Crown alleges that the words he used demonstrated hostility based on Mr Ferdinand's membership or presumed membership of a racial group."

The court heard that Terry maintains he was only sarcastically repeating words that Ferdinand wrongly thought he had used. The case is being heard by Chief Magistrate Howard Riddle, and there is no jury.

Terry was allowed out of the dock into the well of the court to view footage of the alleged insult. Both television clips and unbroadcast footage of the incident, which would normally be used for training purposes, were shown to the court.

It is claimed that Ferdinand said something about "sha****g ya mate's missus" and made fist gestures, before Terry responded. The court was told that Chelsea team-mates Ashley Cole and John Mikel Obi were nearby when insults were traded, but they will not be called as witnesses as part of the prosecution case.

Terry said in a statement to the Football Association five days after the incident that he and Ferdinand had been exchanging "verbals" and he had made a gesture to imply Mr Ferdinand had bad breath. The England defender said he was not offended by the taunts about the alleged affair with Wayne Bridge's ex-girlfriend, because "it's not the first time I've heard it, so it's with a pinch of salt a little bit now".

However he said he was angered by any accusation that he might have used a racist insult. After the match, which took place at QPR's ground Loftus Road, Terry asked a steward to get Ferdinand from the QPR dressing room.

Immediately after the match, Ferdinand did not think that Terry had used racist words, the court heard. He said: "It's handbags innit - it's what happens on the pitch", and the two shook hands. But later, Ferdinand's girlfriend showed him footage posted on YouTube, and he believed Terry had used the racist insult.